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Banking on Minnesota

From large firms to FinTech startups, the smart bet is on financial services talent in the North Star State.

Photo: Getty Images

by RON STARNER

If America's money managers had their own Monopoly board game, there's no doubt which state would occupy Boardwalk and Park Place: Minnesota.

The North Star State's strong banking, finance and insurance industries employ 152,025 workers statewide and are 20 percent more concentrated in the state than in the U.S. overall. Total employment in these sectors is up 6 percent since 2010.

There are more than 5,000 banks and financial services establishments and nearly 4,300 insurance establishments in Minnesota, according to EMSI. Among the largest banks headquartered or operating in Minnesota are U.S. Bancorp, Wells Fargo Bank Minnesota, TCF Financial, Bremer Financial Corp. and BMO Harris Bank.

Even Rich Uncle Pennybags would be impressed with these assets: a world-class education system that produces a nation-leading 93.1 percent high school graduation rate; an overall quality of life that Forbes says is the best in the country; a business climate that CNBC ranks sixth best in the U.S.; the headquarters of 19 Fortune 500 companies — ranking Minnesota third per capita in the country; and a robust broadband infrastructure.

Financial services institutions are only as secure as the broadband networks that serve them, and on that scorecard, Minnesota checks every box. The North Star State is heavily connected to fiber, cable, DSL and wireless broadband networks, with the infrastructure in place to serve the needs of global financial institutions. Large national and international backbone providers serving Minnesota include AT&T, Verizon, Sprint, Level 3, XO Communications, Singapore Telecom, Zayo Bandwidth, CenturyLink, BCE Nexxia (Bell Canada), Windstream, Integra Telecom and Frontier Communications.

Upstarts Changing the World of FinTech

This unique combination of resources is one reason why Minnesota has emerged as a hotspot for FinTech. Both established players and upstarts are developing new financial services technology solutions, and they're using Minnesota as their platform. Every one of Minnesota's five Fortune 500 financial services mainstays (UnitedHealthGroup, U.S. Bancorp, Ameriprise Financial, Thrivent Financial and Securian Financial Group) is investing heavily into FinTech, as is a growing cadre of startups.

Sezzle, based in Minneapolis, uses technology to allow online shoppers to buy goods from participating merchants and then pay for those items in four interest-free installments spaced two weeks apart.

"Young people often have limited access to credit," says Charlie Youakim, CEO and founder of Sezzle. "Our typical customer is between the ages of 18 and 35. Our system allows them to budget and extend their purchasing power."

Minnesota recently has seen the launch of approximately 60 new small businesses and startups in FinTech-related services. In addition, larger players like U.S. Bank, Wells Fargo and Deluxe Corp. are investing in FinTech solutions of their own.

Sezzle started off small, but has grown quickly. They have 43 employees in their downtown office.In 2016, Sezzle raised a little over $1 million from investors with the help of the Angel Tax Credit program managed by the Minnesota Department of Employment and Economic Development (DEED). They've now raised $11 million in total and continue to grow rapidly.

"In five years, I believe we'll employ a few hundred people — and we may not have existed without this tax credit — or we might have located in California to begin with," says Youakim. "(The tax credit) definitely has had an effect."

Likewise, FinTech startup Upsie is making headlines in Minneapolis with some innovative thinking of its own. Founded by former Bemidji State University basketball player Clarence Bethea, Upsie enables consumers to easily and affordably find, purchase and use their new product warranties.

"We wanted consumers to be happy about protecting the things they love," says Bethea. "We wanted to build a consumer's solution, and not a retailer's solution." Upsie's warranty prices are about 50 to 90 percent cheaper than the warranties sold at big-box stores.

Mentors, VC Firms Lending a Hand

Upsie has been helped by Techstars, a global network that helps startups succeed through mentor-led accelerators and through its venture capital arm. Upsie beat out some 3,000 other startups to become one of just 10 companies selected to take part in the 2017 Techstars Retail Accelerator in partnership with Target Startups.

Upsie now has eight employees who work out of offices near the University of Minnesota. Bethea says Minnesota is a good place for startups in the retail sector. "We're fortunate to have Target and Best Buy, two iconic brands that understand the retail space," he says. "We have the local talent, great minds and visionaries here."

They may soon have more company too. The state of Minnesota offers incentives and assistance to help entrepreneurs get their new ventures up and running — such as Minnesota Innovation Loans for Entrepreneurs (MILE). Information technology received 48 percent of the $495 million Minnesota received in venture capital investments in 2017, according to the PwC/CB Insights MoneyTree Report.

Minnesota ranks first in five-year business survival, according to the Bureau of Labor Statistics. Minnesota's Small Business Administration office ranks 10th in its volume of SBA-backed loans (1,908). The office also ranks 16th with $681.2 million in approved loans.

Ron StarnerExecutive Vice President of Conway, Inc.

Ron Starner is Executive Vice President of Conway Inc. He has been with Conway for 16 years and serves as editor of the TrustBelt Report and lead organizer of the annual TrustBelt Conference. He also writes extensively for Site Selection and Conway's Custom Content Publishing Division. His Twitter handle is @RonStarner.